The EU-Singapore Free Trade Agreement (EUSFTA), entered into force 21st November 2019, marks a significant milestone in international trade relations, offering a wealth of opportunities for businesses in both regions. As the first bilateral free trade agreement between the European Union and an ASEAN member state, it sets a precedent for future trade partnerships in Southeast Asia. EUSFTA’s potential to reshape economic landscapes, reduce trade barriers, and foster stronger ties between two dynamic markets.
In this article, we delve into the key aspects of the EUSFTA, exploring its economic impact on Singapore and the EU. We examine the benefits for businesses across various sectors, including electronics and pharmaceuticals. Additionally, we unpack the rules of origin, government procurement opportunities, and intellectual property rights protection under this agreement. Our aim is to provide a comprehensive overview, helping businesses to understand and capitalise on the advantages offered by this groundbreaking free trade agreement.
Overview of the EUSFTA
What is EUSFTA?
We recognise the EU-Singapore Free Trade Agreement (EUSFTA) as a groundbreaking trade pact between the European Union and Singapore. This agreement holds the distinction of being the first bilateral free trade agreement between the EU and an ASEAN member state. It’s an ambitious and forward-looking agreement that aims to enhance trade relations and economic cooperation between these two dynamic markets.
The EUSFTA is a comprehensive ‘new generation’ trade agreement that goes beyond traditional trade liberalisation. It covers a wide range of areas, including tariff elimination, reduction of non-tariff trade barriers, and promotion of services and investment. This agreement is designed to create more opportunities for businesses on both sides, reflecting the EU’s continued interest in engaging with ASEAN and strengthening its presence in the region.
Key objectives
The primary goal of the EUSFTA is to improve market access for businesses from both Singapore and the EU. We’ve identified several key objectives:
- Elimination of customs duties: The agreement removes tariffs on a significant portion of products traded between the two parties.
- Reduction of technical barriers: It aims to eliminate unnecessary technical obstacles that often make it difficult for companies to sell their products in different markets.
- Enhanced access to services sectors: The agreement opens up Singapore’s market for EU services exports, including areas such as transport and telecommunications
- Improved government procurement opportunities: It provides enhanced access to city-level and municipal-level government procurement projects.
- Intellectual property rights protection: The agreement strengthens the protection of intellectual property rights, including geographical indications for specific regional food and drink products.
- Promotion of green technologies: It aims to remove obstacles to trade and investment in environmental services and green technologies.
Timeline of negotiations and implementation
The journey of the EUSFTA from inception to implementation has been a multi-year process. Here’s a timeline of key events:
- 2009: Singapore and the EU launched negotiations for the EUSFTA.
- 2010: Formal negotiations began, based on the ASEAN negotiating directives of 2007.
- 2012: Goods and Services negotiations were concluded.
- 2014: Investment protection negotiations were concluded.
- October 2018: The EUSFTA and the EU-Singapore Investment Protection Agreement (EUSIPA) were signed
- February 2019: The European Parliament approved the agreement.
- 8 November 2019: The Council of the EU approved the EUSFTA.
- 21 November 2019: The EUSFTA entered into force.
It’s worth noting that during the Brexit transition period (1 February 2020 – 31 December 2020), the United Kingdom was treated functionally as an EU Member State and remained a party to EU international agreements.
EUSFTA has already begun to yield benefits for businesses. For instance, it eliminated tariffs on 84% of all Singapore products entering the EU within the first year of implementation (2019). The remaining 16% of tariffs are set to be progressively eliminated.
As we move forward, the EUSFTA continues to evolve. On 1 January 2023, the Harmonised System (HS) codes and description of products in certain annexes were updated as a result of HS 2022 transposition. This demonstrates the agreement’s flexibility and commitment to staying current with international trade standards.
Economic Impact on Singapore and the EU
The economic impact of the EU-Singapore Free Trade Agreement (EUSFTA) was significant on both parties. This groundbreaking agreement has fostered stronger trade relations and enhanced economic cooperation between these two dynamic markets.
Trade statistics
The EUSFTA has had a substantial influence on trade between Singapore and the European Union. In 2022, Singapore emerged as the EU’s 11th largest trading partner worldwide and the largest trading partner in ASEAN. The total trade in goods and services accounted for €130 billion, with a sizeable positive balance of €6.3 billion. This impressive figure underscores the robust economic ties between the two regions.
Looking specifically at trade in goods, Singapore ranked as the EU’s 20th biggest trading partner in 2023, with a total value of €52.6 billion. This figure demonstrates the continued strength of the trade relationship, even in the face of global economic challenges.
The impact on services trade has been particularly noteworthy. In 2022, Singapore was the EU’s fifth-largest trading partner for trade in services, with a total value of €77.6 billion. This highlights Singapore’s importance as a key services hub for European businesses in the Asia-Pacific region.
It’s worth noting that these figures represent a significant increase from previous years. For instance, in 2018, bilateral trade in goods exceeded S$114 billion, with the EU being Singapore’s third-largest goods trading partner and Singapore being the EU’s largest goods trading partner in ASEAN.
Investment figures
The EUSFTA has also had a profound impact on investment flows between the EU and Singapore. Singapore has established itself as a major destination for European investments in Asia and has become the second-largest Asian investor in the EU, trailing only Japan.
In 2022, the bilateral foreign direct investment (FDI) stock between the EU and Singapore reached an impressive €434 billion, having expanded rapidly in the preceding years. This substantial figure underscores the deep economic ties and mutual trust between the two partners.
To put this in perspective, in 2017, the EU was the largest foreign investor in Singapore, with FDI stock exceeding S$376 billion. Conversely, Singapore’s Direct Investment Abroad (DIA) in the EU stood at approximately S$122 billion, making Singapore the EU’s 7th largest foreign investor and largest ASEAN investor.
Projected growth
While specific projections for future growth are not provided in the given information, we can infer potential areas of expansion based on the current trends and the agreement’s provisions.
The EUSFTA has opened up Singapore’s market for EU services exports, particularly in sectors such as transport and telecommunications. This suggests potential for continued growth in services trade, building on Singapore’s position as the EU’s 5th largest trade in services partner worldwide.
The agreement has also removed customs duties and bureaucratic barriers that European firms previously faced when exporting to Singapore. It has improved trade in key goods sectors such as electronics, food products, and pharmaceuticals. These measures are likely to drive further growth in bilateral trade in goods.
In the agri-food sector, we’ve observed significant growth potential. In 2019, the EU-27 exported €1.9 billion of agri-food products to Singapore, more than double the figure from 10 years earlier. With Singapore being the EU’s 5th largest agri-food export market in Asia and 18th worldwide, this sector is poised for continued expansion under the EUSFTA.
Furthermore, with over 10,000 European companies having set up offices or regional hubs in Singapore, we may without risk anticipate increased investment flows and business collaborations in the coming years. The agreement’s provisions for enhanced intellectual property rights protection and increased opportunities for participation in government procurement projects are likely to foster a conducive environment for sustained economic growth and partnership between the EU and Singapore.
Key Benefits for Businesses
EU-Singapore Free Trade Agreement (EUSFTA) offers significant advantages to businesses on both sides. This groundbreaking agreement has paved the way for enhanced trade relations and economic cooperation between these two dynamic markets. Let’s explore the key benefits that businesses can enjoy under this agreement.
Tariff elimination
One of the most substantial benefits of the EUSFTA is the elimination of tariffs. Before the agreement, Singapore had already implemented zero duties on imports of all agri-food products, with the exception of beer. Upon the agreement’s entry into force, Singapore eliminated its remaining tariffs on beer, stout, and samsu. This move has created a more level playing field for EU exporters in the Singaporean market.
On the EU side, the agreement has had a significant impact on Singaporean exports. In the first year of implementation (2019), tariffs were eliminated on 84% of all Singapore products entering the EU. This immediate reduction in trade barriers has opened up new opportunities for Singaporean businesses to expand their presence in the European market.
Enhanced market access
The EUSFTA has significantly improved market access for businesses in various sectors. For instance, it has been observed enhanced opportunities for Asian food products made in Singapore. Products such as lap cheong (dried Chinese sausage) and sambal ikan bilis (spicy crispy anchovies) can now enter the EU tariff-free under flexible Rules of Origin, up to a combined quota of 1,250 tonnes annually.
Moreover, the agreement has created a level playing field for businesses in each other’s markets, particularly in the services sector. It covers a wide range of service sectors, including:
- Financial services
- Professional services
- Computer and related services
- Research and development
- Business services
- Telecommunication services
- Environmental services
- Tourism and travel-related services
This comprehensive coverage ensures that service providers, professionals, and investors from both regions can benefit from increased market access and non-discrimination rules.
Reduced technical barriers
EUSFTA has made significant strides in removing unnecessary technical barriers to trade (TBT). These barriers often made it difficult for companies to sell their products in different markets. The agreement has addressed this issue, benefiting a wide range of sectors in both the EU and Singapore, including:
- Electronics
- Motor vehicles and vehicle parts
- Pharmaceuticals
- Renewable energy
- Meat and meat products
The reduction of technical barriers has been achieved through various measures. For example, the agreement has put in place more compatible technical requirements and testing for products. It has also simplified rules regarding marking and labelling, and reduced the duplication of costly and time-consuming procedures for testing products.
A notable example is in the automotive sector, where Singapore now recognises current EU standards and testing on cars and car parts. This recognition eliminates the need for duplicate testing, saving time and resources for businesses.
Furthermore, the agreement has introduced the concept of Authorised Economic Operator, which streamlines customs procedures for trusted traders. This initiative facilitates trade by reducing bureaucratic hurdles and expediting the movement of goods between the EU and Singapore.
In conclusion, the EUSFTA has brought about significant benefits for businesses through tariff elimination, enhanced market access, and reduced technical barriers. These measures have created a more favourable environment for trade and investment between the EU and Singapore, opening up new opportunities for businesses to grow and expand their operations in both markets.
Sectors Affected by EUSFTA
EU-Singapore Free Trade Agreement (EUSFTA) has had a significant impact on various sectors, enhancing trade opportunities and reducing barriers for businesses in both regions. Let’s explore the key sectors affected by this groundbreaking agreement.
Food and beverage industry
The EUSFTA has brought about substantial changes in the food and beverage sector. Prior to the agreement, Singapore had already implemented zero duties on imports of all agri-food products, with the exception of beer. Upon the agreement’s entry into force, Singapore eliminated its remaining tariffs on beer, stout, and samsu. This move has created a more level playing field for EU exporters in the Singaporean market.
A remarkable growth in EU agri-food exports to Singapore has been observed. In 2019, the EU-27 exported €1.9 billion of agri-food products to Singapore, more than double the figure from 10 years earlier. This significant increase has positioned Singapore as the EU’s 5th largest agri-food export market in Asia and its 18th worldwide.
The agreement has also had a positive impact on Singaporean food products. Asian food products made in Singapore, such as lap cheong (dried Chinese sausage) and sambal ikan bilis (spicy crispy anchovies), can now enter the EU tariff-free under flexible Rules of Origin, up to a combined quota of 1,250 tonnes annually.
Furthermore, the EUSFTA recognises and protects geographical indications for wines, spirits, agricultural products, and foodstuffs originating in the territories of the EU or Singapore. This protection enhances the value of these products in both markets.
Electronics and automotive
The electronics and automotive sectors have seen significant benefits from the EUSFTA. The agreement has put in place more compatible technical requirements and testing for products, reducing technical barriers that could otherwise make it difficult for companies to sell their products in different markets.
For the electronics industry, the agreement aims to avoid duplicative and burdensome conformity testing procedures for product safety and electromagnetic compatibility of electrical and electronic equipment, including electrical household appliances and consumer electronics. Singapore now accepts a supplier’s declaration of conformity for products deemed to be of low risk for consumer safety, health, or the environment.
In the automotive sector, the EUSFTA has brought about significant changes. It’s now possible to sell new motor vehicles and car parts from the EU in Singapore without any additional testing or certification, provided they are certified in line with international standards accepted in the EU, notably United Nations Economic Commission for Europe (UNECE) type approval regulations. This recognition eliminates the need for duplicate testing, saving time and resources for businesses.
Services sector
The services sector has experienced enhanced market access under the EUSFTA. Singapore businesses now have improved access to a wider range of services sectors in the EU. These include:
- Professional Services
- Business Services
- Tourism and Travel Related Services
- Postal Services
- Telecommunication Services
- Transportation
- Computer and Related Services
- Environmental Services
- Railway Services
This comprehensive coverage ensures that service providers from both regions can benefit from increased market access and non-discrimination rules.
Moreover, the agreement has opened up new opportunities in government procurement. Singapore companies can now bid for more government procurement projects in the EU, including at the city and municipal level. This expansion of opportunities has the potential to significantly boost Singapore’s service exports to the EU.
In conclusion, EUSFTA has had a profound impact on various sectors, from food and beverages to electronics, automotive, and services. By reducing trade barriers, harmonising standards, and opening up new markets, the agreement has created a more favourable environment for businesses in both the EU and Singapore to thrive and expand their operations.
Rules of Origin under EUSFTA
Rules of origin play a crucial role in the EU-Singapore Free Trade Agreement (EUSFTA). These rules determine the ‘economic nationality’ of traded goods, ensuring that only products genuinely originating from the EU or Singapore benefit from the preferential tariffs under the agreement.
Definition and importance
Rules of origin are essential in determining whether a product qualifies for lower or zero tariffs under the EUSFTA. They help customs authorities apply duties correctly, benefiting businesses in both regions. To be considered originating in the EU or Singapore, a product must be either wholly obtained in one of these territories or manufactured there using non-originating materials that fulfil specific criteria.
Product-specific rules
The EUSFTA sets out product-specific rules in Annexe B of Protocol 1. These rules typically fall into three categories:
- Value-added rule: The value of non-originating materials cannot exceed a certain percentage of the product’s ex-works price.
- Change of tariff classification: The production process must result in a change of tariff classification between non-originating materials and the final product. For example, producing paper (Harmonised System Chapter 48) from non-originating pulp (Harmonised System Chapter 47).
- Specific operations: Certain production processes are required, particularly in the textile, clothing, and chemical sectors.
To provide flexibility, the EUSFTA includes a tolerance rule. This allows producers to use a limited amount of non-originating materials that would otherwise be prohibited by the product-specific rule. For most products, this tolerance is set at 10% of the ex-works price or net weight, depending on the product category.
Cumulation provisions
Cumulation is a key concept in the EUSFTA’s rules of origin. It allows materials originating in one party to be considered as originating in the other when used in the manufacture of a product. The agreement provides for three types of cumulation:
- Bilateral cumulation: Materials originating in Singapore can be counted as originating in the EU when used in manufacturing a product in the EU, and vice versa.
- Cumulation with ASEAN countries having preferential agreements with the EU: This provision allows materials originating in such countries to be counted as originating in Singapore or the EU when used in manufacturing.
- Cumulation with ASEAN countries without preferential agreements with the EU: This allows materials originating in such countries to be counted as originating in the EU or Singapore when used in manufacturing specific products listed in Annexe D of the Protocol on Rules of Origin.
By understanding and leveraging these rules of origin, businesses in both the EU and Singapore can maximise the benefits of the EUSFTA, enhancing their competitiveness in each other’s markets.
Government Procurement Opportunities
EU-Singapore Free Trade Agreement (EUSFTA) has opened up significant opportunities in government procurement for businesses from both regions. This agreement builds upon the existing framework established by the World Trade Organisation’s Agreement on Government Procurement (GPA), of which both Singapore and the EU are members.
Access to EU markets
Even before the EUSFTA, Singapore and the EU had open and modern systems of public procurement, applying high standards of transparency and procedural fairness to their public tendering processes. In many cases, EU firms were already able to compete for public contracts in Singapore above certain value thresholds. However, the EUSFTA has further enhanced these opportunities, creating a more level playing field for businesses from both regions.
Under the EUSFTA, Singapore has agreed to additional disciplines on tendering, which has expanded the scope of opportunities for EU firms. One significant change is the lowering of value thresholds for open tendering procedures for bodies such as the Public Utilities Board and the Energy Market Authority. This adjustment has made it easier for EU companies, particularly small and medium-sized enterprises, to participate in Singapore’s government procurement market.
Sectors open for bidding
The EUSFTA has expanded the types of public service contracts covered by commitments on transparency and non-discrimination. This expansion is particularly beneficial for EU companies with strengths in specific sectors. We’ve identified several key areas where EU firms can now bid for government procurement projects in Singapore, including:
- Computer-related services
- Telecommunications services
- Land transport services
- Maintenance and repair services
- Sewage and refuse disposal
- Architecture and engineering services
Moreover, the agreement has opened up opportunities at various levels of government. EU companies can now bid for more government procurement projects in Singapore, including at the city and municipal levels. This expansion provides a broader range of potential contracts for EU businesses to pursue.
On the EU side, the agreement has also increased access for Singaporean companies. The EU has added to its list of entities open for bids additional central-level government ministries, agencies, and other bodies, compared to those included in its WTO Government Procurement Agreement list. Furthermore, the EU has included more types of public services contracts covered by open tendering compared to its WTO commitments, such as:
- Railway services
- Computer services
- Telecommunications services
- Landscape architectural services
Transparency measures
We understand that access to information is one of the biggest obstacles EU smaller companies encounter in accessing overseas markets. To address this issue, the EUSFTA has implemented enhanced transparency measures. Singapore has expanded the types of public service contracts covered by commitments on transparency and non-discrimination. This increased transparency helps EU companies, especially smaller ones, to better navigate the Singaporean government procurement market.
These measures ensure that businesses from both regions have clear and equal access to information about procurement opportunities. This transparency not only levels the playing field but also encourages more companies to participate in cross-border government procurement, fostering increased competition and potentially leading to better value for public funds.
In conclusion, the government procurement provisions of the EUSFTA have created a more open and transparent environment for businesses from both the EU and Singapore. By expanding access, lowering thresholds, and enhancing transparency, the agreement has opened up new avenues for companies to grow and compete in each other’s markets.
Intellectual Property Rights Protection
EU-Singapore Free Trade Agreement (EUSFTA) has established a robust framework for intellectual property rights (IPR) protection, which is crucial for both Singapore and European competitiveness. The agreement includes a comprehensive chapter covering provisions on copyright, designs, enforcement, and geographical indications (GIs).
Enhanced IP protection
The EUSFTA has introduced modern rules to protect and enforce intellectual property rights. This enhanced protection strengthens the position of both EU and Singaporean businesses, fostering an environment conducive to innovation and creativity. We’ve observed that this comprehensive approach to IPR protection has contributed to the success of the agreement, benefiting businesses on both sides.
Geographical Indications
One of the key successes of the EUSFTA has been the protection of Geographical Indications (GIs). GIs are intellectual property rights that identify products with specific qualities, reputation, or characteristics attributable to their geographical origin. The agreement has established a system for registering GIs in Singapore, offering a high level of protection for commercially important European GIs.
Since the implementation of the EUSFTA, Singapore has set up a GI registry, allowing EU producers to apply for GI registration in Singapore. According to the latest figures released, 165 EU GIs have been successfully registered in Singapore, covering a wide range of products including wines, spirits, cheese, and meat products. This enhanced protection strengthens consumers’ recognition of authentic, high-quality EU food products, wines, and spirits in Singapore.
The success of GI protection under the EUSFTA is evident in the increasing trade flows. In 2022, EU agri-food exports to Singapore reached a record €2.2 billion, representing almost 7% of the EU’s total exports to Singapore. GIs accounted for the majority of EU food and beverage exports to Singapore, primarily spirits, wines, and cheeses.
Enforcement mechanisms
To ensure effective protection of intellectual property rights, the EUSFTA includes detailed provisions on civil enforcement measures. We’ve noted that these mechanisms have been designed to combat counterfeiting and piracy effectively.
The agreement has introduced robust border enforcement measures. Right holders can now request that Singapore’s customs authorities seize counterfeit trademark goods and pirated copyright goods. By November 2022, this provision was extended to include counterfeit GI goods and pirated design goods for both import and export.
Furthermore, Singapore and the EU have committed to procedures that allow authorities to suspend the release of counterfeit trademark goods, pirated copyright goods, and counterfeit GI goods at their own initiative. This proactive approach enhances the overall effectiveness of IPR protection under the EUSFTA.
In conclusion, the intellectual property rights protection provisions in the EUSFTA have created a strong foundation for safeguarding innovation and creativity. The enhanced protection of GIs, in particular, has not only benefited EU producers but has also provided Singapore consumers with greater access to authentic, high-quality European products.
Conclusion
The EU-Singapore Free Trade Agreement has a significant impact on trade relations and economic cooperation between these two dynamic markets. Its far-reaching provisions cover various sectors, from food and beverages to electronics and services, creating new opportunities for businesses to grow and compete. The agreement’s focus on tariff elimination, market access enhancement, and the reduction of technical barriers has led to a more favourable environment for trade and investment between the EU and Singapore.
To wrap up, the EUSFTA has set a precedent for future trade partnerships in Southeast Asia. Its comprehensive approach to intellectual property rights protection, including geographical indications, has strengthened the position of businesses from both regions. The agreement’s provisions on government procurement and rules of origin have also opened up new avenues for companies to participate in each other’s markets. As the EUSFTA continues to evolve, it is poised to drive further growth in bilateral trade and investment, cementing the strong economic ties between the EU and Singapore.
Some references:
[1] – https://trade.ec.europa.eu/access-to-markets/en/content/eu-singapore-free-trade-agreement
[2] – https://www.mti.gov.sg/-/media/mti/microsites/eusfta/eusfta-guide-for-sg-businesses-v2.pdf
[3] – https://www.europarl.europa.eu/legislative-train/package-other-fta/file-eu-singapore-fta
[4] – https://www.enterprisesg.gov.sg/grow-your-business/go-global/international-agreements/free-trade-agreements/find-an-fta/eusfta
[5] – https://www.mti.gov.sg/Trade/Free-Trade-Agreements/EUSFTA
[6] – https://www.mti.gov.sg/-/media/MTI/Microsites/EUSFTA/Benefits-of-the-EUSFTA-as-of-Apr-2021.pdf
[7] – https://trade.ec.europa.eu/access-to-markets/en/content/quick-guide-working-rules-origin
[8] – https://trade.ec.europa.eu/access-to-markets/en/content/cumulation-0
[9] – https://www.eeas.europa.eu/delegations/singapore/geographical-indications-are-key-success-eu-singapore-free-trade-agreement-eusfta_en?s=178
[10] – https://www.eeas.europa.eu/sites/default/files/documents/2023/EUSFTA%20GI%20Booklet%202023.pdf
